EU roaming: a race to the bottom?

Getting rid of EU premium roaming charges sounds great for the consumer, but is it good for the mobile industry? European travellers, bruised by ‘bill shock’, are unlikely to care about that. If they can pay the same rates abroad as they do at home, what is there not to like?

Strand Consult makes the useful point that, under the principle of the consumer paying the same abroad as when at home, this will probably benefit asset-light mobile operators and MVNOs (and disadvantage those with higher costs).

The research firm gives the example of a German buying a cheap SIM card in Lithuania then bringing it back to Germany to call, text or surf at the cheaper Lithuanian rate.

This poses a problem. Strand Consult points out that the cost to deliver a minute of voice, a text message, or a megabyte of data can vary significantly from country to country. So, with the “roam like home” plan, the underlying cost structure – taxes, mobile termination rates, fixed and operating costs – can be “completely divorced” from end-user mobile prices.

And it’s bad news for network operators that have had to buy licences, deploy infrastructure and manage networks. They are likely to have higher costs than the likes of MVNOs.

The whittling down of prices – so the Strand Consult argument goes – means margins in some markets will be squeezed and network investment threatened.

And the prospect of thinner margins might scare new entrants away – another thing the EU’s digital chief doesn’t want to happen.

True, this could all turn out to be a very minor headache if using SIM cards purchased abroad is a niche activity. But buying SIM cards online, according to Strand Consult, is a growing trend.

Mobile operators, naturally, don’t like regulators telling them what they can or cannot charge for services. Yet there is an argument they carry much of the blame for greater regulatory scrutiny on roaming prices. Many feel they have charged excessive amounts for data abroad and it is regulators – not the operators – that have been the spur for innovation in this area (think real-time viewing of roaming data usage and customer warnings when bills reach a certain level).

Yet could it be that customers are really willing to pay a bit extra for roaming as it’s still perceived as a value-added service (a hangover, perhaps, from all that hefty charging)? If that’s the case, then Europe’s mobile industry would be losing out on revenue if prices abroad were roughly the same as those at home.

Of course, mobile operators are likely to compensate for any losses by upping domestic prices and charging more for non-EU roaming.

It means the long-term impact of Kroes’ roaming proposals – on both consumers and Europe’s mobile industry – is far from clear.